Briefing
The proliferation of Maximal Extractable Value (MEV) in public blockchains presents significant economic attacks, yet its theoretical underpinnings remain insufficiently formalized. This paper introduces a comprehensive formal theory of MEV, grounded in an abstract model of smart contracts and adversarial knowledge. The new framework provides the necessary basis for rigorous security proofs, enabling the design of demonstrably MEV-resistant protocols and fostering a more equitable and predictable on-chain environment.
Context
Prior to this research, the understanding of Maximal Extractable Value (MEV) largely relied on empirical observations and partial definitions, which proved inadequate for formal security analysis. The prevailing theoretical limitation involved the inability to rigorously define MEV across diverse blockchain contexts, preventing a clear distinction between benign value extraction and malicious attacks. This absence of a unified theoretical model hindered the development of provably MEV-free smart contracts and protocols.
Analysis
This paper presents a novel formal theory of MEV through an abstract model of contracts and adversarial capabilities. The core mechanism involves axiomatizing “transaction deducibility,” which defines how adversaries combine private knowledge with public mempool information to craft profitable transaction sequences. This approach fundamentally differs from previous models by integrating a comprehensive characterization of adversarial inference and introducing a game-theoretic definition of “universal MEV.” The universal MEV accounts for optimal token redistribution and identity-agnostic adversaries, allowing for a robust assessment of maximal potential gain and a clearer separation of “good” MEV (e.g. arbitrage) from “bad” MEV (e.g. sandwich attacks).
- Core Concept ∞ Formal MEV Theory
- New Model ∞ Transaction Deducibility
- Key Authors ∞ Bartoletti, M. and Zunino, R.
- Key Property ∞ Universal MEV
- Key Distinction ∞ Good vs. Bad MEV
Outlook
This foundational work opens new avenues for constructing MEV-freedom analysis tools, enabling developers to design more robust and secure decentralized applications. Future research will extend the model to address long-range attacks spanning multiple blocks and incorporate the costs associated with MEV extraction, offering a more complete picture of adversarial economics. The theory holds the potential to unlock a new generation of DeFi protocols with enhanced fairness and predictable transaction execution, directly impacting the long-term architectural stability of blockchain systems.
Signal Acquired from ∞ arxiv.org